Bitcoin or cryptocurrency is a digital currency used as a medium of exchange and store of value. Bitcoin and other cryptocurrencies are decentralized, i.e., there is no central authority to control its transactions, creation, issuance, and circulation, which makes them different from FIAT currencies such as INR, USD, etc. As a result, Bitcoin has been increasing in popularity day by day, with many traders even in India opting for an opportunity to trade or invest in bitcoin.
Pros of using bitcoins in the import & export business
1. Bitcoins are not issued or regulated by any central authority-
A central bank gives every currency, i.e., its issuance, regulation, and transactions. This makes, of course, them centralized. But on the other hand, decentralized currencies such as bitcoin or any of its variants are not issued or regulated by a central authority, making these more attractive to traders, be it offline or online.
2. Bitcoins can help you save taxes-
Since bitcoins are decentralized, no single authority controls them, making them more attractive to people looking to save their taxes. In addition, bitcoins help you in many ways like- you don’t need to provide the KYC (Know Your Customer) documentation while trading/investing, which can lead to hefty fines if not provided.
Also, all your trades and transactions are anonymous, which means that there is no way your trading history can be accessed by any third party, which leads to better privacy.
3. You are responsible for your security-
The biggest drawback of using bitcoins is that you need to take care of your security since they are decentralized. Therefore, you need to secure and maintain your private keys and take the necessary precautions steps to secure your bitcoins.
4. No tax benefit for merchants accepting bitcoin-
Many online portals are now accepting cryptocurrencies as a mode of payment. Still, the common problem that all these merchants face is that there is no tax benefit if they accept payments in cryptocurrency, which makes it not so attractive for them hence discouraging mass adoption of cryptocurrencies.
Obviously, despite so many setbacks, bitcoins are increasing in popularity even among Indian traders, investors, and merchants since they have been given the freedom to trade anonymously and help in saving tax without any third-party intervention. Learn more at digital currencies
Cons of using bitcoin in import & export business
1. Volatility of bitcoin price-
Bitcoin and other cryptocurrencies, including altcoins, are highly volatile; hence, it is hard to predict its future. Existing merchants who accept this currency as a mode of payment (for example, Microsoft) face problems like their products or services becoming more expensive for consumers if they accept payments in bitcoins whose prices are very high.
2. Acceptance as a mode of payment-
Bitcoin is still at its nascent stage, and not many traders/merchants accept it as a mode of payment. It will take time to fulfil the conditions required for large-scale acceptance, making bitcoins less attractive due to no immediate returns on investment, unlike FIAT currencies which give you right over your money.
3. Weak infrastructure-
Another problem that bitcoin faces are the weak infrastructure, i.e., slow transaction processing time and high transaction fees. For example, recently, transactions are taking hours to process due to network congestion, leading to higher transaction fees (fee is directly proportional to confirmation time).
Thus, it can be seen that bitcoins have many pros and cons in different fields. However, you can mitigate the risks of using it by diversifying your portfolio, i.e., investing a small portion in cryptocurrencies while keeping the rest in FIAT currencies which will give you diversified returns.
Should bitcoins be used in the import & export business?
Unlike FIAT currencies, bitcoin or other cryptocurrencies are not backed by any assets; hence, it is always risky to invest in them. However, bitcoins are legal since they are decentralized, but using them in the import & export business can expose you to many risks mentioned above.